A Comparison of Operations Modes

Definition: A startup is a company without any revenue and 50 or fewer people, which must deliver a product to the market shortly.

Easy access to capital and not adjusting to the new world after leaving a big company or another industry are some major reasons for "big company disease". This was very common in the bubble, when huge Series A and B venture capital rounds were easy to get without a real business plan or vision that showed how a company would make a profit. Many companies would have survived easily on so much capital if they did not contract this disease.
Unfortunately, it was common to see a large company CEO placed in startups and look like fish out of water. It was also common to see recent college grads acting as CEO. Some investors made quick money this way, flipping the "companies" to IPO that had no real or sustainable revenue stream before anyone realized there was no path to profitability. Some knew this and therefore were acting unethically, others got sucked in...

The lack of a good business design process is the number one reason why most businesses fail today.  Almost everything else, like poor market, running out of capital, unexpected risks and poor sales, is just a symptom of this root problem.

• How Many People Does It Take?
   

Consider for a moment all the things we as individuals do not know!  It is pretty sure that today no one can even keep one-tenth of one percent of the knowledge available to mankind in their head!  Scholars say the last Renaissance Man existed in the early sixteen hundreds sometime.  This was the last century in which anyone alone could claim to be an authority on everything.  Today, four hundred years of collecting knowledge later, we now double human knowledge every few years!  How can anyone be silly enough to think they can know enough across a whole industry plus management, sales, finance, marketing, technology, and operations to actually design a business...

The lack of a good business design process is the number one reason why most businesses fail today.  Almost everything else, like poor market, running out of capital, unexpected risks and poor sales, is just a symptom of this root problem.

• Defining "Business Design"
   

For purposes of this discussion, let us consider the inner concentric circle of the vision pie below as the definition of a business design.  Therefore:

DEFINITION: A Business Design - The sum of the complete strategies for each of the business disciplines required to deliver a product or service to the market.

We can assume the tactics can be driven by, or fall out of, the strategies developed.  Certainly, this is best at any early stage of development.  This is a simple, straightforward definition and very useful for our purposes.  Note, however, that this definition does not mean the business design actually works, only that you have a design.  A...

The lack of a good business design process is the number one reason why most businesses fail today.  Almost everything else, like poor market, running out of capital, unexpected risks and poor sales, is just a symptom of this root problem.

• Where Do Entrepreneurs Go Wrong?
   

The sad fact is, most businesses should not be run as originally envisioned by the founders for two main reasons:

1)   You never, never, ever know enough when you found a business not to make many, many adjustments along the way, and

2)   It is highly unlikely the founder has exactly all the right experience for this new business across the many business disciplines needed.

With the many thousands of business models possible for any given product or service, expecting to pick the best purely based on one person's previous experience out of the gate is almost absurd.  Only if this business is tremendously simple and the founder has spent decades in that...

The lack of a good business design process is the number one reason why most businesses fail today.  Almost everything else, like poor market, running out of capital, unexpected risks and poor sales, is just a symptom of this root problem.

• Why Business Design Must ALWAYS Be The #1 Priority of Any New Venture?
   

Designing a business is more art than science because it is something that takes lots and lots of real-world experience.  Personally, I do not think you can learn it at any university, or by any amount of study, until after you have spent many years working in management to understand people and business well.  It would be like someone reading for ten years about painting, without ever picking up a brush, and then when they finally pick up a paintbrush to paint their first person or landscape; and expect to paint a masterpiece.  Pretty unlikely, huh?  We may be able to teach strategy in school, but even that is just a...

When The Liabilities Exceed the
Benefits of Being a Director

By Peter Cohen

In the last week, some corporate directors have written checks out of their personal accounts to settle suits against the companies on whose boards they served.  Earlier this week, 10 former WorldCom directors paid a total of $54 million -- $18 million from their own pockets, representing 20% of their net worth.  Today announced that 18 Enron directors agreed to pay $168 million, 10 of them paid $13 million from their own pockets, to settle their portions of securities class action suits.  These events probably mark the beginning of a trend that will cost directors of other bankrupt companies more money.

While these directors no doubt made these payments to avert the risk of even higher ones, their decisions alter the cost/benefit analysis for current and potential corporate directors.  It is no longer enough to show up at quarterly meetings, enjoy the CEO’s hospitality, and collect...

Advice From A Nobel Prize Winner On Human Capital Management

An Interview From The Line Zine e-Newsletter

Gary S. Becker, the winner of the Nobel Memorial Prize for Economic Science in 1992, is a Professor of Economics and Sociology at the University of Chicago and a Senior Fellow at the Hoover Institution and University. He is recognized for his expertise in human capital, the economics of the family, and economic analysis of crime, discrimination, and population.

Becker: I would start out with some obvious things that are still sometimes forgotten: the basic resource in any company is the people. Remember Bill Gates’ famous comment that if you took away the top thirty employees at Microsoft, it would be a pretty ordinary company. And what’s true for companies is true for nations as well. In the New Economy, the reliance on people hasn’t fallen, but has increased. We are much more a human capital-based economy than the economy was even thirty years ago.

The...

 Reprinted from the Red Herring: https://www.redherring.com

Although this is by no means a comprehensive list there are many classics here....

VC P.S: Ten Myths
and Realities of VC 

 By Lawrence Aragon Redherring.com

Bill Reichert's brother is a doctor. His father also was a doc. So were his grandfather and his great-great-grandfather. So how could it be that Mr. Reichert is sitting and talking about venture capital over a plate of bacon and eggs at the Peninsula Creamery coffee shop in downtown Palo Alto? As I join him in the high-cholesterol meal, I can almost see the family of physicians staring down, wagging their fingers. "I'm the first Reichert male not to be doctor," he says, munching on a piece of bacon. "We figure it was my other grandfather's genes that sent me on this path."

Not the path to the coffee shop. The entrepreneurial path. His mother's father, Robert McElroy, built two companies -- one that eventually became the multibillion-dollar American Hospital Supply. Following in granddad's footsteps, Mr. Reichert founded five companies of his own, including a software company while he was getting his...